U.S. business restocking flat in March while sales fall 1.1 percent, largest drop in 9 months

5/13/2013

ASSOCIATED PRESS

A lack of inventory building could slow economic growth because it means businesses are ordering fewer factory-made goods, especially when sales are falling.

WASHINGTON — U.S. businesses left their stockpiles unchanged in March for a second straight month while their sales fell sharply.

The Commerce Department said today that business stockpiles showed no increase in March on a seasonally adjusted basis. Businesses hadn't upped their restocking in February, either. Sales fell 1.1 percent in March, offsetting a 1 percent gain in February.

A lack of inventory building could slow economic growth because it means businesses are ordering fewer factory-made goods, especially when sales are falling. However, a report on spending at retail businesses in April suggests consumers rebounded after a weak March. That could lead businesses to replenish their shelves this spring.

For March, manufacturers and retailers both increased their stockpiles 0.2 percent, while wholesale businesses cut their inventories 0.3 percent.

All three categories of businesses experienced lower sales in March, leading to the biggest decline since June.

A separate Commerce report today showed that retail sales bounced back in April. Retail sales edged up a slight 0.1 percent in April. But sales were much stronger when excluding a steep drop in gas prices. When excluding gas station sales, retail spending rose 0.7 percent in April.

The government also said retail sales in February was slightly stronger than last reported, while March slightly weaker.

The government estimated last month that the economy grew at an annual rate of 2.5 percent in the January-March quarter. That was up from a growth rate of 0.4 percent in the previous quarter.

Growth accelerated in the first quarter largely because consumer spending rose at the fastest pace in more than two years. But some economists expect growth has slowed slightly in the current April-June quarter to around 2 percent.

Consumers increased their spending in April, despite paying higher Social Security taxes that has reduced their paychecks this year. Their spending will likely add to economic growth in the April-June quarter. Consumer spending makes up roughly 70 percent of economic activity.

Steady job growth could offset some of the impact of the tax increase. The economy has added an average of 208,000 jobs a month from November through April. That's up from only 138,000 a month in the previous six months. The job gains could provide consumers with more money to offset the impact of the tax increase.

Cheaper gas is leaving consumers with more disposable income. The national average price has risen slightly over the past week to $3.58 a gallon. But it is still 21 cents lower than the peak price reached on Feb. 27.

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